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PS Business Parks (PSB) Q3 FFO and Revenues Top Estimates

Moreover, the figure came in 7.7% higher than $1.43 recorded in the prior-year quarter. The rise stemmed from higher net operating income (NOI), reduced general and administrative expenses, and savings from lower preferred distributions.

Rental income came in at around $100.5 million, marking 3.2% growth from the year-ago figure. Additionally, the figure outpaced the Zacks Consensus Estimate of $99.4 million.

Note: All EPS numbers presented in this write-up represent funds from operations (FFO) per share.

Quarter in Detail

Same Park rental income was up 4.4% year over year, while Same Park operating expenses flared up 3.2%. As a result, Same Park NOI climbed 5% year over year, mainly on the back of improving rental rates.

Annualized Same Park realized rent per square foot rose 4.6% year over year to $15.32. Same Park weighted average occupancy in the quarter was 94%, down 10 basis points (bps) year over year.

Liquidity

PS Business Parks exited third-quarter 2017 with cash and cash equivalents of 132.7 million, higher than the prior-year end tally of $128.6 million.

Dividend Update

On Oct 23, the company announced a regular quarterly dividend of 85 cents per share, same as the previous payout. The dividend is payable on Dec 28 to shareholders of record as of Dec 13, 2017.

Conclusion

We are encouraged by the better-than-expected FFO performance of PS Business Parks. The company’s solid liquidity, and a portfolio diversified across various locations and price points augur well for long-term growth. Furthermore, healthy fundamentals in the multi-tenant flex, office and industrial asset categories are anticipated to drive growth, while portfolio-repositioning strategies will likely help the company emerge stronger. Nonetheless, pricing pressure in certain markets and intense competition from developers, owners and operators remain key concerns.

The stock has gained 14.1% year to date, outperforming 2.3% growth recorded by the industry it belongs to.

We now look forward to the earnings releases of other REITs like Ventas, Inc. VTR, Boston properties, Inc. BXP and CyrusOne Inc CONE. While Ventas will release results on Oct 27, Boston Properties and CyrusOne are slated to report their numbers on Nov 1 and Oct 26, respectively.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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